FarmPolicy

April 21, 2014

Farm Bill- Sequestration; Hearing; Biofuels; and, Land Values

Farm Bill- Sequestration, Budget Issues

David Rogers reported yesterday at Politico that, “Senate Democrats said Thursday they will move ahead with a roughly $110 billion budget package — evenly divided between new tax revenues and spending cuts — to forestall the across-the-board sequester cuts due to take effect March 1…The Nevada Democrat [Sen. Majority Leader Harry Reid] hopes to bring the bill to the floor the week of Feb. 25 when senators have returned from the Presidents Day recess.”

Mr. Rogers noted that, “[The bill contains:] $27.5 billion in net spending reductions from farm programs. About $31 billion would be saved by cutting direct cash payments to producers — a system that is widely criticized at a time of high farm income. And to win support from Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.), the bill reallocates about $3.5 billion of these savings to extend farm programs left hanging by the White House and Senate Republicans in the New Year’s tax deal.”

Alan K. Ota reported yesterday at Roll Call Online that, “The White House threw its support behind the plan, and called on congressional Republicans to ‘back off their insistence of putting the entire burden of reducing the deficit on the backs of the middle class and seniors.’

“House Speaker John A. Boehner of Ohio, meanwhile, said Thursday he was open to developing a sequester replacement measure within coming days if Reid can move the measure he is developing in the Senate. ‘If they’re willing to pass a bill, we’ll find some way to work with them to address this problem,’ he said.”

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “A critic of direct payments who advocated for their elimination in last year’s Senate farm bill, Stabenow, a Democrat from Michigan, said in a press call Thursday it didn’t make sense that direct payments were extended last year while disaster programs that helped farmers who suffered losses were not extended.”

(Note: A FarmPolicy.com transcript of Senator Stabenow’s press call yesterday is available here).

Mr. Clayton explained that, “Yet, Stabenow noted that by offering to use direct payments, agricultural programs would be guaranteed to avoid a new round of sequestration cuts in the future. In essence, agriculture would have made its full contribution to sequestration. ‘This becomes agriculture’s contribution to deficit reduction,’ she said.

“If sequestration goes into effect, nearly every USDA program would be cut by 5% from March through Oct. 1, the end of the 2013 fiscal year. Stabenow said those cuts would cost hundreds of thousands of jobs ‘and be very harmful to the agricultural economy.’

In using direct payment for cuts, Stabenow said the shift would avoid job losses as well as possible furloughs in areas such as meat inspectors. Over the past week, U.S. Agriculture Secretary Tom Vilsack has been caught in a battle of back-and-forth statements with leaders in the meat industry over possible furlough of meat inspectors. Industry officials have argued USDA has a legal obligation to ensure the Food Safety and Inspection Service continues to keep meat inspectors on the job regardless of budget cuts.”

The DTN article added that, “Stabenow made the announcement after holding a hearing Thursday on agricultural disasters from 2012. With $20 billion to $22 billion or so over 10 years that would not be cut from the agricultural budget, Stabenow said Congress could again renew disaster aid for livestock and specialty-crop producers that was not renewed at the end of the year by Congress.

“‘So instead of having a direct payment and giving it to folks who don’t need it, we need to make sure we are providing resources to those who do,’ she said.

“Other programs that also were not extended at the end of last year involving organics, rural development and energy programs, for example, would also be funded under this plan, she said.”

Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “The bill extends disaster assistance for 2012 and 2013 for agriculture sectors left out of a ‘fiscal cliff’ deal passed in early January, and funds energy, conservation and specialty crop programs that were not funded in the short-term farm bill extension included in the fiscal-cliff deal.

“Stabenow said that Senate leaders made clear no more cuts to agriculture spending will be required going forward for the purposes of deficit reduction.

“The $27.5 billion represents a ceiling on savings going forward and allows the Agriculture Committee to move forward with writing a five-year farm bill to replace the stopgap measure passed on New Year’s Day.”

Daniel Looker reported yesterday at Agriculture.com that, “Responding to a question from Agriculture.com, Stabenow sought to clear up any confusion about what this would mean for farmers who can start signing up for direct payments next week, on February 19. ‘I’m assuming that contracts are honored’ by USDA, she said.

“Later she said the plan to eliminate direct payments would start ‘probably more likely in 2014’ than this year. That’s how the Congressional Budget Office counts it, too, according to one knowledgeable source who explained that ‘CBO does not assume any savings from the 2013 Direct Payment, which is paid in the 2014 fiscal year.’”

However, in a statement yesterday, House Ag. Comm. Chairman Frank Lucas (R., Okla.) noted that, “Farmers and ranchers want to be a part of the solution to the fiscal crisis we face in this country.  And, the House Agriculture Committee demonstrated that commitment to being a part of the solution when we passed a comprehensive, balanced farm bill that cut more than $35 billion from all of agricultural spending, including the farm safety net, conservation programs, and reforming the SNAP program.

“‘We made those reforms in the context of a comprehensive, five-year farm bill that ensured we still met the food and fiber needs of all Americans.  The Senate’s approach of taking away our investment in rural America without addressing the hole it will create is not balanced and not acceptable.’”

An update posted yesterday at the National Sustainable Agriculture Coalition Blog (NSAC) noted that, “‘We applaud Senator Reid for proposing to fix the fiscally irresponsible and unfair farm bill extension that was slapped together behind closed doors at the end of 2012,’ said Ferd Hoefner, NSAC Policy Director.”

While Andrew Grobmyer, the Executive Vice President of the Agriculture Council of Arkansas, noted yesterday that, “The Agricultural Council of Arkansas strongly opposes the Stabenow proposal to eliminate direct payments as part of a ‘Sequestration Alternative.’”

Meanwhile, Mike Lillis reported yesterday at The Hill Online that, “House Democrats on Thursday introduced a $120 billion plan to cut deficits and avoid the automatic sequester cuts set to hit March 1…[T]he House Democratic plan comes at the same time Senate Democrats proposed their own $110 billion plan to replace the sequester, with the money split evenly between tax hikes and spending cuts.”

The Hill update added that, “The package would also eliminate a number of farm and oil subsidies…”

 

Farm Bill: Direct Payments, Sugar, Conservation

A news release yesterday from Sen. Claire McCaskill (D. Mo.) stated that, “[Sen.] McCaskill] and Republican Senator Jeff Flake of Arizona today introduced legislation that would end wasteful farm direct payments-direct cash transfers of taxpayer dollars to farmers from the government that do not take into account current yields or prices.”

And Niraj Chokshi reported yesterday at National Journal Online that, “Before you bite into that next Valentine’s Day morsel, you may want to contemplate the complex sugar subsidies behind it — and their far-reaching impact on the U.S. economy…A bipartisan group of lawmakers introduced a bill Thursday that would unwind price supports for domestic sugar producers.”

The article added that, “‘No program should be immune to updates or improvements, not while we’re losing valuable manufacturing jobs all over the country,’ Sen. Jeanne Shaheen, D-N.H., said in a statement on Thursday after unveiling the bill at a press conference. She was joined by Sens. Mark Kirk, R-Ill., and Pat Toomey, R-Pa., as well as Reps. Joe Pitts, R-Pa., Earl Blumenauer, D-Ore., and Danny Davis, D-Ill. The bill is the Shaheen-Kirk Sugar Reform Act.”

A news release yesterday from Rep. Tim Walz (D., Minn.) noted that, “Today, [Rep. Walz] and Rep. Kristi Noem (R-SD) introduced common sense legislation to encourage good land stewardship practices and preserve habitats for pheasants, ducks and other wildlife on native sod and on grasslands that haven’t been farmed in the past…This legislation would reduce crop insurance assistance for the first four years for crops grown on native sod and certain grasslands converted to cropland.”

Both the American Farmland Trust and National Sustainable Agriculture Coalition, in news items yesterday, indicated support for the legislation.

 

Senate Ag Committee Hearing: “Drought, Fire and Freeze: The Economics of Disasters for America’s Agricultural Producers”

Reuters writer Charles Abbott reported yesterday that, “U.S. farmers will plant crops this spring under the shadow of a persistent drought that grips prime farmland from the Mississippi River to the Rocky Mountains, with grain supplies already tight from drought losses in 2012.

“In all, 56 percent of the contiguous United States is under moderate to exceptional drought, twice the usual amount, the Senate Agriculture Committee was told on Thursday.”

The article noted that, “‘In fact, we are forecasting drier conditions,’ said Roger Pulwarty, director of the National Integrated Drought Information System, a federal agency [prepared testimony here] . Above-normal rainfall benefited the southern Plains at the start of this year.”

“Some 59 percent of winter wheat was under drought conditions, said Joe Glauber, Agriculture Department chief economist [prepared testimony here]. ‘While that also implies that spring planting may be affected by drought conditions as well, there have been improvements in the eastern Corn Belt, where many areas are no longer experiencing drought.’

With adequate rainfall during the growing season, U.S. yields will rebound to normal levels, leading to bumper corn and soybean crops. In turn, commodity prices would fall as near-empty grains bins are filled. The corn stockpile is expected to be smallest in 17 years by harvest-time this year,” the Reuters article said.

Bloomberg writer Alan Bjerga reported yesterday that, “Livestock producers, who thinned herds to avoid rising feed costs, continue to experience hardships, Glauber said. About 69 percent of cattle-producing areas and 59 percent of hay acreage remain in drought conditions, with rain needed to allow ranchers to rebuild their operations.”

Chris Clayton reported yesterday at DTN (link requires subscription) that, “‘Thanks to our successful crop insurance program, many farmers will be able to recover from their losses,’ said Senate Agriculture Committee Chairwoman Debbie Stabenow, D-Mich. ‘For those farmers who didn’t have access to crop insurance, or who relied on risk management tools that would have been included in the farm bill, the future is less certain’” [opening statement from Chairwoman Stabenow here].

Mr. Clayton added that, “Leon LaSalle, a rancher board member for the Montana Stockgrowers Association, said ranchers always had to wait for an ad-hoc disaster bill until 2008 when a livestock disaster program was included in the farm bill. That program, however, expired just before the 2012 drought hit.

“‘There is no insurance for catastrophic livestock losses such as those experienced by southeastern Montana ranchers during the horrific wildfires of 2012,’ LaSalle said.”

Senator Max Baucus (D., Mont.) elaborated on the importance of disaster assistance for livestock producers and the benefits that program certainty brings to ranchers at yesterday’s hearing- audio (MP3- 2:28).

Mr. Clayton pointed out that, “Jeff Send, a cherry producer from Michigan, talked about the destruction he and other cherry farmers faced last year in the state. Michigan cherry producers have the potential to grow as many as 275 million pounds of tart cherries, but last year farmers grew only 11.6 million pounds. In 2011, Send and other farmers would have qualified for the Supplemental Revenue Assistance Program, but it had expired.”

More specifically on crop insurance, Dr. Glauber, the USDA’s Chief Economist, indicated that, “It made a very big difference.  Now, let’s go to the flip side.  If you were underinsured, if you weren’t insured, then you were looking at yield losses.  And particularly for some specialty crop producers, where the participation rates tend to be lower, or there may not be anything other than noninsured acreage, the disaster programs—and we know, for example, in your area, Pennsylvania, New York, because, as you mentioned, the warm early spring, a lot of the tree crops flowered and then were hit with a devastating freeze.  And again, if you were insured, you’ll get some compensation there, but if not, you were facing some serious losses.”

The sequestration issue also came up at yesterday morning’s hearing.

Sen. Thad Cochran (R., Miss.), the Committee’s Ranking Member, indicated that, “Sequestration is a word we’re all still trying to figure out how you define, and what the practical consequences of that are.  I think it shifts more responsibility to the administration than they’re accustomed to having.  Usually Congress specifies levels of appropriation for government program funding and that’s carried out.

“And I can remember when—I think it was maybe one of the Nixon administrations—where they came in and impounded funds, and everybody in Congress threw up their hands in holy horror, ‘My gosh, we directed that this be spent.  This is mandatory spending.’  So we contrive these things that tell the administration in no uncertain terms this is money that’s to be spent.  It’s appropriated and it’s mandated; spend it.

“What’s your reaction to that in this environment?  Have things changed?  Are we going back to government impoundment?  And when do we know about it?  How are you going about identifying those programs that are going to have the funds impounded, or sequestered, the new word?”

Dr. Glauber responded by noting that, “Well, thanks.  I remember not so fondly the days of Gramm-Rudman, and the cuts that went in place back in the ‘80s.  Again, as I mentioned, my understanding, at least, the Secretary’s been working with OMB on what qualifies, at least under the mandatory spending, what would be subject to sequestration.  Obviously there’s some accounts that won’t be because of contractual relations and other things, and then others that at least the lawyers feel that they do have authority to sequester.  I can get back with you on that.  I agree with you in your point that the sooner the better this is made known.  People have to make planning decisions.  I understand.”

Later, Sen. Pat Roberts (R., Kans.) noted that, “But what is considered mandatory and discretionary is going to be exceedingly important to farmers out there, and you know which programs we’re talking about.  So I think Senator Cochran really hit the nail on the head, and if we can get that information to all of us, that would be helpful.”

An update yesterday at the National Sustainable Agriculture Coalition Blog also provided an overview of the Senate Ag Committee Hearing, “Natural Disasters Spur Crop Insurance and Farm Conservation Discussion.”

 

Biofuels

A news release yesterday from Roger Wicker (R., Miss.) stated that, “[Sen. Wicker] and David Vitter (R-La.) on Thursday, introduced legislation to block an increase in the amount of ethanol that can be blended with gasoline.  The bill would overturn Environmental Protection Agency (EPA) waivers that allowed gasoline containing 15 percent ethanol (E15) to be used for many passenger cars and light trucks.”

 

Land Values

Bloomberg writer Elizabeth Campbell reported yesterday that, “Farmland values in the U.S. Midwest jumped 16 percent last year, the third-largest annual gain since the late 1970s, as a prolonged drought drove up crop prices, the Federal Reserve Bank of Chicago said.”

Keith Good

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